Exponential Growth Bias and Financial Literacy

The tendency to underestimate the future value of a variable growing at a constant rate, anexample of exponential growth bias, has been linked to household financial decision making.We show that exponential growth bias and standard measures of financial literacy arenegatively correlated in a representative sample of Swedish adults. Since financial literacy islinked to household decision making, our results indicate that examining the relationshipbetween exponential growth bias and household finance without adequate controls forfinancial literacy may generate biased results....